South Africa’s big debt problem: Dawie Roodt

Depending on how much the government plans to recover for the R2 billion it paid to keep the fuel price down in November, consumers could be looking at a reduction in the petrol price of around R1.50 a litre in December, while diesel could drop by as much as 92 cents a litre.

This is according to Efficient Group chief economist, Dawie Roodt, who said that rather than using the standard formula for calculating the fuel price, the government could play a direct role by deciding how much of the so-called Slate levy it wanted to recoup.

“The state is out of pocket by around R2 billion as a result of subsidising the fuel price in November,” he said.

“My expectation is that they will recoup it over two months rather than taking it all back in December in which case we could be looking at a reduction in the petrol price of around R1.50 a litre while diesel will drop by about 90 cents a litre.”

Roodt warned that the overall economic outlook remains grim with more jobs being lost on a monthly basis while inflation-related pay increases have been few and far between.

“The one exception is government which continues to pay well above inflation-related increases to its bloated staff.”

He warned that if the state does not drastically reduce its massive debt which now stands at about 55% of GDP, it will have to ask the International Monetary Fund for a bail-out which would result in immediate austerity measures being imposed on the country.

“We could be looking at a situation similar to the one that brought massive poverty and hardship to Greece when the IMF had to bail them out,” Roodt said.

Personal debt problems

Neil Roets, CEO of Debt Rescue, said deeply indebted consumers should not see the reduced fuel price as an opportunity to splurge on Black Friday and Cyber Monday sales.

“South African consumers collectively owe their creditors in excess of R1.7-trillion with most of them three months or more in arears with their repayments,” he said.

“This windfall is an opportunity to start paying off debt and save as much as possible for a rainy day.

“While it is true that there will be some very tempting deals on offer, consumers should think long and hard before plunging themselves even deeper into debt by splurging on luxury goods that they most likely don’t need.”

He added that South Africa was ‘far from seeing the light at the end of the tunnel’.

“Taking place on Friday November 23, many retailers and online shops such as Takealot have promised deals that would tempt even the most financially distressed amongst us.

“It is our belief and many leading economists share that belief that we are far from staging a recovery,” said Roets.

“In short, it is my belief that things are going to get a lot tougher before they get better. Now is not the time to act recklessly. On the contrary – it is more important now than ever before to implement fiscal discipline and save whatever money is left over at the end of the month.

“Buy only what is absolutely necessary. While we all feel that we desperately need a holiday and the end of a brutal year, keep those holidays within budget and don’t think that if you don’t have the money for school fees in December that the money will somehow, magically become available in January when the schools reopen,” he said.